FINDING STOCKS TO SHORT

I have two main ways of searching for stocks to short—one is easy and the other is hard.
The “easy” way is not all that easy, of course. It involves looking at short candidates from the Spike group, as well as other sources. I have already described my approach to trading tips. They provide ideas for possible trades which I analyze using my system and make my own decision whether to trade them or not. My own trading system, described earlier in the book, must confirm the tip in order for me to trade it. Still, with dozens of smart people scanning and researching the stock market, and sending in their picks, there are often attractive short candidates. I put them through the Triple Screen and Impulse systems to decide whether to trade those picks and what parameters to use.
The “hard work” approach involves looking at the entire universe of stocks. I begin by scanning stock industry groups and subgroups, looking for those that look attractive for shorting (Figure 7.24). If you like to short the tops, look for the groups that appear toppy. If you like to short the downtrends, look for the groups that are already moving within established downtrends. Once you find an attractive group or subgroup, open up the list of its component stocks and look for shorting candidates among them.
Figure 7.24 Scanning groups in TC2007
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